TOKYO/FRANKFURT/WASHINGTON After years of applying plenty of stick to commercial lenders unhappy with negative interest rate policies, central bankers in the euro zone and Japan are experimenting with some carrot, too.
With the coronavirus pandemic ravaging the global economy, the European Central Bank (ECB) and the Bank of Japan (BoJ) have started paying banks to borrow from them, hoping they will keep the credit taps open for cash-strapped households and companies.
This subsidy is the newest twist in the topsy-turvy world of negative rates policy: rather than just punishing banks for sitting on their idle cash as they have been doing for years, central banks are now rewarding them for lending, or, in the ECB’s case, just for the mere fact of borrowing.
It also marks a shift that makes any further cut to the ECB’s and BoJ’s negative deposit rates an increase in how much banks pay for parking their excess reserves unlikely soon, even as money markets begin to price in chances that negative rates may soon make debuts in the US and Britain.
Indeed, BoJ Governor Haruhiko Kuroda emphasized last week that he saw no need to deepen negative interest rates now.
“At this moment, we don’t think it’s necessary,” Mr. Kuroda said last week. “The most important thing now is to provide necessary financing to firms through the banking system, and to make financial markets stable,” he said in a seminar organized by the Financial Times.
AN EASING FOR BANKSWhen the coronavirus pandemic hit the euro zone in March, the ECB was widely expected to cut its deposit rate again. But it refrained from doing so, instead offering banks loans at negative rates as long as they didn’t shrink their loan books.
The terms were later improved, with banks getting 0.50% for one year with no strings attached, or 1% if they don’t shrink their loan books.
The BoJ, which learned from the ECB in introducing negative rates in 2016, is now following suit in retreating from the policy.
Last month, it decided to pay 0.1% interest to financial institutions tapping its crisis-response lending program. That led to a surge in participating lenders.
It also was a departure from the BoJ’s long-held skepticism over rewarding banks for borrowing for fear of drawing criticism as unfairly subsidizing them.
“By offering a 0.1% interest, we’d like to incentivize (commercial banks) into helping us extend financial support to a wider range of firms,” Mr. Kuroda said last month.
Japanese bank lending rose steadily after Mr. Kuroda took the BoJ’s helm in 2013, including after the adoption of negative rates in 2016. But analysts attribute the increase more to rising loans for property investment.
While negative rates apply to only a small portion of banks’ reserves, they crushed already-narrowing profit margins at weaker regional banks. The BoJ warned in April that dwindling profits had driven banks into taking on more risk, enough to potentially destabilize Japan’s banking system.
NEGATIVE INTEREST? NOT INTERESTEDThe questionable effect on lending has led many other central banks to look askance at negative rates, an issue raised again in the face of monumental job losses and activity declines resulting from efforts to stop the spread of COVID-19, the respiratory illness caused by the novel coronavirus.
Federal Reserve Chair Jerome Powell spoke strongly against the idea in a webcast appearance last week, saying negative rates are “not something that we are looking at” even while the next steps to battle the coronavirus-related economic downturn are examined.
The US central bank, in its own way, has similarly tried to pull banks into helping with the rescue. It has trimmed what it charges banks to borrow to just 0.25%, negligibly above what they can earn on their reserve deposits. The change in terms for the “discount window” came with encouragement that banks use it liberally and take advantage of some relaxed oversight.
But negative rates are a non-starter as a policy matter. Though investors have been betting recently the Fed will be forced down that road, Mr. Powell’s critical stance is echoed by other policy makers who feel the stress on banks and the US dollar’s unique global role make negative rates policy unwise.
The Bank of England (BoE) also appears hesitant, although it has been less full throated than the Fed in shooting the idea down. Governor Andrew Bailey said last week the BoE is not considering taking “the very big step” of pushing interest rates below zero, but that was undercut days later by the bank’s chief economist telling the Daily Telegraph the central bank was looking at the idea at the idea “with somewhat greater immediacy.”
Sayuri Shirai, a former BoJ board member, says it has become a “near-consensus” among global central banks that negative rates have huge drawbacks and mixed positive results.
“It doesn’t make sense to deepen negative interest rates and hurt banks when you’re actually trying to encourage them to lend more,” she said. “It’s a tool that is very hard to use at a time like now.”
Help from the banking sector is particularly important in Japan and Europe, where banks are the primary credit source for many companies.
Both the ECB and the BoJ have eased collateral requirements for banks that tap their loan programs. After blind-siding banks with the 2016 move to negative rates, the BoJ now frequently seeks their views on what framework works best for them.
In its role as the euro zone’s bank supervisor, the ECB has also let banks eat into their capital and liquidity requirements to navigate the current crisis and invited them to keep provisions sufficiently low to avoid further economic damage.
For a watchdog set up to clean up the banking sector after the financial crisis more than a decade ago, it was a major change of tack.
“Unlike in the 2008 financial crisis, banks are not the source of the problem this time,” said Andrea Enria, the ECB’s chief supervisor. “But we need to ensure that they can be part of the solution. Reuters

Peso climbs as oil prices continue to drop - BusinessWorld Online

THE peso climbed against the greenback on Monday on the back of a continued drop in global oil prices due to falling demand caused by the coronavirus disease 2019 (COVID-19) as well as a decrease in Treasury purchases by the US Federal Reserve.
The local unit finished trading at P50.79 per dollar on Monday, appreciating by 11 centavos from its P50.90 close on Friday.
The peso opened the session at P50.90 per dollar. Its weakest showing was at P50, while its strongest was at P50.75 against the greenback.
Dollars traded decreased to $320.56 million on Monday from the $491.6 million seen last Friday.
A trader attributed the pesos strength to recent moves from the US Federal Reserve which improved investor optimism.
The peso appreciated after the US Federal Reserve announced a $15-billion reduction in daily bond purchases from the market and from optimism amid prospects of reopening the US economy, the trader said in an email.
The New York Fed said it aims to purchase $75 billion in Treasuries starting this week. This will bring the daily purchase amount down to an average of $15 billion per day from the $30 billion per day seen last week.
Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso tracked the latest drop in global oil prices.
The peso closed stronger, among its strongest in two years, after the sharp decline in global oil prices that could fundamentally lead to lower inflation, Mr. Ricafort said in a text message.
Reuters reported that crude oil futures dropped in electronic trading on Sunday, succumbing to its lowest level since November 2001 on the back of falling demand due to the COVID-19 pandemic.
The trader expects the peso to trade within the P50.70 to P50.90 levels this Tuesday while Mr. Ricafort gave a forecast range of P50.60 to P50.90.
The peso was among the most stable currencies in Asia amid heightened volatility due to the pandemic, according to the Department of Finance (DoF).
In an economic bulletin, the DoF said the peso ranked third among the three currencies that maintained their value against the greenback in the region as of April 15, after appreciating by 0.04% versus the US dollar in its year-to-date value.
This was just behind Japanese yens 2.05% appreciation and Hong Kong dollars 1.28% appreciation, while all other countries recorded depreciation.
The 12 Asian currencies studied, based on Bloombergs data, include Chinese yuan renminbi, Japanese yen, Indian rupee, Philippine peso, Singapore dollar, South Korean won, Thailand baht, Vietnamese dong, Malaysian ringgit, Indonesian rupiah, Hong Kong dollar and Taiwan dollar.
Despite the rising risks in the global economy, heightened by the spread of COVID-19, the collapse of global stock markets, the crash in Latin American currencies and the downgrading of credit ratings of many economies, the Philippine peso remained firm, almost unmoving from year-end 2019 level, the DoFs statement read.
The DoF said the peso-dollar exchange rate had also shown stability with a coefficient of variation of 0.26%, the smallest among the 12 regional currencies and lower than the 1.94% regional average.
The main reasons for the pesos growing strength and stability are the countrys strong BoP position and rising GIR. Strong foreign exchange inflows from exports of services, remittances, income from investments abroad, direct foreign investments and foreign borrowing all contributed to the strong BoP position. These in turn boosted the confidence in the Philippine peso, it said.
Strong macroeconomic fundamentals support the countrys financial position. The BoP surplus in 2019 was the highest in recent history. Manageable budget deficits and prompt adjustment of monetary settings in response to current developments help maintain investor confidence, it added. L.W.T. NobleandB.M. LaforgawithReuters

León Gallery to hold Summer - BusinessWorld Online

LEÓN Gallery is pushing through with its 2020 Summer Online Auction on April 25, 11 a.m. It will be held at its official website.
In these unusual times, one of the challenges is how to maintain a sense of normalcy and, more important, a sense of optimism. In spite of the trying times we need to get back to our routine and enjoy our simple pleasures without forgetting our generosity and resolve, said a statement from León Gallery.
Guest-curated by couturier Pepito Albert, interior designer Jonathan Matti, and interior and lighting designer Mark Wilson, the auction features 374 items including artworks by National Artist for Visual Arts Fernando Amorsolo, Lee Aguinaldo, Macario Vitalis, Angel Ulama, Patrick Gläscher, Leeroy New, and Claudio Bravo. It also includes fine jewelry from the Margarita Cojuangco collection, chinaware and pottery, and furniture and antiques.
Part of the proceeds will go to Helping Women & Others (HWAO) Foundation.
To view the online catalogue, visit https://en.calameo.com/read/00465630529ddd423e427. To register to bid, visit https://leonexchange.com/. For more information, visit https://leon-gallery.com/ or https://www.facebook.com/LeonGalleryMakati/. — MAPS

UAAP athletes channelling their focus to a different battle - BusinessWorld Online

By Michael Angelo S. MurilloSenior Reporter
WITH athletic competitions in the country forced to take the backseat amid the countrys ongoing battle against the coronavirus disease 2019 (COVID-19) pandemic, some athletes have made a conscious effort to use the downtime to continue to make a difference and have their presence felt albeit in a different arena.
Among these athletes are basketball player Jack Animam and fencer Maxine Esteban, both part the University Athletic Association of the Philippines community, who initiated fundraising drives to help frontliners who are leading the way in the COVID-19 battle.
Ms. Animam of National University and a national athlete has chosen to rally behind the medical staff of a hospital in her hometown of Malolos, Bulacan.
As of this writing, the fund drive of Ms. Animam has generated P38,500, with proceeds going to the staff of Bulacan Medical Center (BMC) to help them procure personal protective equipment (PPE) and other basic necessities.
The BMC is near us and I saw how it is filled with patients to be treated. So I said to myself why not do a fundraiser to help the frontliners with their needs, said the 21-year-old NU player, who helped the country win gold medals in the 5-on-5 and 3×3 basketball tournaments as part of the Gilas Pilipinas Womens team in the 2019 Southeast Asian Games held here in the country.
Just a little help to repay their sacrifices for the country and to keep them motivated, she added.
Ms. Animam said the decision to move and do her share was a no-brainer, believing in situations like what the country is currently in, all help from as many people as possible would go a long way.
It also provided a motor that being a national athlete she felt she needed to come on board the fight in her own way.
Of course being part of the national team does not mean you only have to do your part on the basketball court. You have to do your part as a Filipino citizen and use the platform you are given to help and make a difference, said Animam.
To those who want to donate to the fund drive of Ms. Animam, you may course them through PayMaya (Liiya Patricia Santiago,+639957810238), GCash (Jack Danielle Animam, +639272563958} and BPI Savings (Jack Danielle Animam, 2269187819).
YOUTH HAVE TO PARTICIPATEThe genuine desire to help is also what is driving Ms. Esteban of Ateneo and her family to do their share while also underscoring that the youth of the country should do their part in the COVID-19 battle.
Well, at first I wanted to make my break productive. I really thought of how I can do my part as a Filipino citizen and as a national athlete to help out our frontliners, said the 19-year-old Ateneo sophomore, who was part of the Team Foil squad that won bronze during the 2019 SEA Games.
Adding, I feel like the youth has to actively participate and take part in helping the government find ways to reach out to the medical frontliners and the affected communities.
Early this month, Ms. Esteban and her sisters launched A Small Thing Goes A Long Way fundraising drive and she was happy to share that they have raised P339,000.70 as of last week, apart from receiving 50 pieces of COVID-19 Uratex pillows and 92 bottles of alcohol.
Beneficiaries of the their fund drive include UST Hospital, UERM Memorial Hospital, and National Childrens Hospital, to go along with affected communities in San Juan City.
The pillows, on the other hand, will go to families in San Juan and UERM.
I was surprised when I saw my friends donating a lot and some people I dont even know, said Ms. Esteban, who was the UAAP Season 81 Rookie of the Year and Most Valuable Player in womens fencing.
She expressed hope that people would continue donating to their drive, which will last until April 26.
To help Ms. Esteban in their drive, you can donate through BDO Wilson Street (Account number: 6580077300 Account name: Maxine Isabel Esteban), G-Cash (09175284329) and Paypal ([email protected]* *Send under friends and family).

Game of HORSE - BusinessWorld Online

It spoke volumes about the competitiveness — or, to be more precise, lack thereof — of the HORSE matchup between Zach LaVine and Paul Pierce that its most memorable segment involved the former recounting his experience in the shadows of a 40-year-old Kevin Garnett while a rookie with the Timberwolves. Indeed, the 13th overall pick of the 2014 National Basketball Association draft dominated the Challenge, blanking the 2008 Finals Most Valuable Player with an array of shots that highlighted his athleticism and silky smooth touch. Never mind that the rules disallowed any dunking and effectively negated his inherent advantage over the rest of the field.
Not that LaVine was the lone player who impressed in yesterdays first round. Mike Conley Jr. was likewise a standout, failing to get the better of opponent Tamika Catchings just once. He was a picture of consistency, going to his non-dominant hand — including once from behind the backboard — to get ahead. His Hall-of-Fame-bound opponent was more game, and certainly put up a better fight than the laid-back Pierce did, but he proved to be in his element. And, no doubt, he benefited from having a gym in his home.
The other two set-tos bucked conventional wisdom. Chauncey Billups appeared ready to go down as expected, only to gain confidence midway through and upset pre-event favorite Trae Young. The come-from-behind victory was particularly surprising given the way he crafted it: via three-point shots with a twist that his All-Star foil seemingly had the talent, not to mention the range, to pull off as well. The latter was gracious in defeat, acknowledging the superiority of a Legend and a mentor of mine but hinting at a rematch.
Parenthetically, Allie Quigley seemed all too ready to use traditional HORSE fare to upend Chris Paul. For a while there, she looked ready to fold in the face of a spirited comeback. Ultimately, through, the early cushion she built proved more than enough for her to pull through. Forget that she was aided by the point gods slow start, and, with the outcome on the line, uncharacteristic inability to bank in a shot from the charity stripe. And considering her velvet stroke and willingness to dig deep inside her bag of tricks, she may yet raise more eyebrows.
Moving forward, the Billups-Conley and LaVine-Quigley tiffs are projected to be equally compelling. The format itself lends well to tense moments, but only when participants are eager to push the envelope. In this sense, the four are primed to entertain. And, in a time of COVID-19, the fans win.
Anthony L. Cuaycong has been writing Courtside since BusinessWorld introduced a Sports section in 1994.
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AN off-cycle monetary response ahead of the Monetary Boards next policy-setting meeting could be on the table soon to cushion the economy from the coronavirus disease 2019 (COVID-19) outbreak, according to Nomura Global Markets Research.
The Japanese research house said the Philippines has fallen behind its neighbors in fiscal measures to the pandemic.
We reiterate our forecast for an additional 75 bp of policy rate cuts by BSP (Bangko Sentral ng Pilipinas) to 2.5%, all delivered in Q2, starting with a 50 bp (basis point) cut possibly well ahead of the next scheduled meeting on 21 May, Nomura said in a note issued Monday.
BSP Governor Benjamin E. Diokno said Sunday that the central bank may decide to make a deeper cut that will bring down rates to below 3% in response to a once-in-a-lifetime crisis caused by the pandemic and to also ensure a safe landing for the economy post-outbreak.
A deeper cut is warranted in response to the expected sharp economic slowdown, Mr. Diokno told reporters in a text message.
The central bank cut rates by 50 bps on March 19 to curtail the impact on the economy of the pandemic and the lockdown.
This brought overnight reverse repurchase, lending, and deposit rates to 3.25%, 3.75% and 2.75%, respectively.
Since 2019, key policy rates have been reduced by a combined 150 bps, almost completely unwinding the 175 bps worth of rate increases in 2018 when inflation was surging.
Meanwhile, the reserve requirement ratio of big banks was lowered by 200 basis points to 12% last week to increase liquidity during the lockdown. The Monetary Board said it will also review bringing down the RRR for thrift and rural banks, which have been maintained at 4% and 3%, respectively.
With discussions within government of a supplementary budget still limited, the Philippines appears to be lagging regional peers on urgently needed fiscal measures, so monetary policy will likely provide an immediate response, Nomura Global said.
UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion is also pricing in the possibility of an off-cycle response as the situation is unprecedented.
An off-cycle cut would be helpful for the financial sector and markets so that they can take advantage and prepare for economic losses. More RRR cuts will also be appropriate as the BSP does whatever it takes to help the broader economy, he said in an e-mail.
Mr. Asuncion said the current situation could escalate into a financial crisis that would have a deeper impact in the long run if not enough measures are carried out.
ING Bank-NV Manila Senior Economist Nicholas Antonio T. Mapa noted that the BSP seems to be taking the dovish lead from the Federal Reserve during the pandemic. However, he warned that easing the lockdown will remain key to resuming economic activity.
Central banks can lend and lend but at the end of the day, someone will need to spend for the economic engines to turn. With households quarantined at home, the ball is in the court of the national government, Mr. Mapa said in an e-mail.
Since March 15, the lockdown has been imposed on Luzon, which accounts for 70% of Philippine gross domestic product.
The enhanced community quarantine (ECQ) has been extended until April 30, further lengthening the closure of many businesses.
In this time of COVID-19, monetary policy will rely less on actual economic data to make policy-driven decisions given the dire need to support the economy, Mr. Mapa said.
BSP can take its cue from extremely moribund growth scenarios proposed by the DoF (Department of Finance) to cut rates further and survey banks to gauge how tight liquidity is, he added.
Finance Secretary Carlos G. Dominguez III said last week that economic growth could be flat or could even contract by as much as 1% due to the freeze in economic activity during the ECQ.
Mr. Dominguezs worst-case scenario is weaker than the -0.6% to 4.3% estimate issued by the National Economic and Development Authority (NEDA) prior to the extension of the lockdown and much lower than the 5.9% growth posted in 2019 and the 6.5% to 7.5% original target set by the government before the outbreak started. — Luz Wendy T. Noble

Good Ayton run - BusinessWorld Online

DeAndre Ayton seemed to have the perfect strategy to win the NBA 2K20 Players-Only Tournament. He picked teams with varied styles in order to match up well with opponents. And because he could use a given team only once while making his way to a projected championship, he made sure to choose in the moment judiciously. And, indeed, he wound up tapping the Lakers and Bucks in his last two games. He had already used the Rockets, Clippers, Suns, and Nets en route, leaving him with the two powerhouses and the Jazz and Pelicans against real-life teammate Devin Booker in the finals.
Theres no question that Aytons extremely comfortable with an Xbox One controller in his hands. And hes not just a videogame buff. In fact, hes a longtime NBA 2K diehard, going so far as to enjoy developer Visual Concepts latest iteration via its MyCareer Mode and likewise engaging opponents online. In other words, hes comfortable customizing settings and fiddling with sliders, hallmarks of serious players with serious intentions. Which was why he found himself counted among the pre-event favorites, and why he sported a spotless record heading into the finals.
There was just one problem, though. As good as Ayton was, Booker proved even better with all the marbles on the line. His Lakers lost to the Rockets 72-62 in the first contest of their best-of-three affair, and his Bucks bowed to the Nuggets 74-62 in the second. Its fair to argue that he could well have emerged victorious with a larger sample size given his immense familiarity with the vagaries of NBA 2K20. That said, his opponents gaming background and comfort level with the titles preferential option for a five-out style cannot be overemphasized.
Still, Ayton has cause to hold his head high. If nothing else, he managed to wax noted trash talker Pat Beverley in the semifinals, and by using seemingly inferior teams to boot. First, he went with the Nets against the Celtics, ignoring the pregame walk in the park boast his opponent threw at him. The set-to was close all the way, and he trailed by three after three quarters. He buckled down to work in the crunch, however, and scored 24 the rest of the way to prevail 75-69. Next, he got his very own Suns and, properly hyped, proceeded to school the Nuggets. The 74-67 final score wasnt reflective of how dominant he was — starring, of course, his videogame self.
If there was anything the tournament showed, it was this: Beverley is a nasty frontrunner and a sore loser through and through. He literally walked out after being beaten, leaving the good-spirited Ayton flummoxed but, no doubt, only too happy to put him in his place. He gets major props for entertainment, but zero credit for his attitude. The friends he tapped to help him and give him advice throughout the tournament should have reminded him of the value of sportsmanship. Theres a reason gamers stay away from his ilk; being competitive is one thing, and being unable to take as much as he can dish out is quite another.
Speaking of sportsmanship, Ayton certainly had it in excess no matter who was up against him and regardless of the stakes. In the finals, he even allowed Booker to pause the proceedings beyond the allowable number of times. And he isnt really into verbal jabs; his mutterings are more for self-motivation. Granted, hes not always on the mark. For instance, he declared that the Suns are the best team in 2K right now. He also didnt seem to know how to best play the Bucks, reflecting his lack of practice with them — a glaring mistake for a veteran gamer. Then again, his hearts in the right place, and his Players-Only Tournament stint will be remembered for it above all else.
Anthony L. Cuaycong has been writing Courtside since BusinessWorld introduced a Sports section in 1994.
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